White House Signals New Push for Value-Added Tax?

Although the imposition of a value-added tax (VAT) would violate President Barack Obama’s central campaign promise – a “firm pledge” that no family making less than $250,000 per year would see “any form of tax increase” – he continues to surround himself with those sympathetic to the tax.

President Obama, who in April 2010 deemed a VAT “something that would be novel for the United States”, announced on Monday his intention to nominate Princeton University’s Alan B. Krueger to head the Council of Economic Advisors. In a 2009 blog post for the New York Times, Krueger wrote:

“Why not pass a 5 percent consumption tax to take effect two years from now?”

Even when pressed, the Obama White House has never ruled out a VAT. As the timeline below illustrates, those in and around the White House have been flirting with a VAT from the earliest days:

December 18, 2008: The Obama transition team announces VAT advocate Ezekiel Emanuel’s appointment as special advisor for healthcare at the Office of Management and Budget. Emanuel had long pushed for a VAT as a way to pay for government-funded universal healthcare. (See here, here, and here.)

“A value-added tax -- I’ve looked at lots of them -- ought to be something that’s on the table.”

April 6, 2010: Speaking at a New York Historical Society event, Obama advisor Paul Volcker said a VAT is “not as toxic an idea” as it has been in the past and concluded:

"If at the end of the day we need to raise taxes, we should raise taxes."

April 19, 2010: The New York Times reports that the White House economic team has been calculating government revenues from a possible VAT:

But since any Social Security plan would probably preserve benefits for those nearing retirement, it would not help the administration achieve its goal of reducing the deficit to 3 percent of gross domestic product, from 10 percent, within a decade.

One way to reach that 3 percent goal, by the calculations of Mr. Obama’s economic team: a 5 percent value-added tax, which would generate enough revenue to simultaneously permit the reduction in corporate tax rates Republicans favor.

MARK HALPERIN: Will the President ever consider tax reform that will involve a VAT? Would he ever consider it?

(Refusal #1) GOOLSBEE: Look, we are not, the report -- and I’m not sure where it came from cause it’s not anything I saw -- was that they were contemplating a VAT, that is not true. We have stood up this bipartisan fiscal commission, which as I understand it is considering a whole bunch of things.

(Refusal #3) GOOLSBEE: I’m not going to get into a linguistic game about it.

HALPERIN: Well it’s not a linguistic game.

(Refusal #4) GOOLSBEE: He’s looking to see what comes out of the fiscal commission. He’s going to look at it.

HALPERIN: We had a President for eight years who said ‘no new taxes, we’re not going to raise taxes’. This President said ‘no taxes on the middle class’. Arguably there are taxes in the healthcare bill that will hit the middle class. So again, a VAT would be a big change in America. Would he consider it, if the commission recommends it, would he consider it?

(Refusal #5) GOOLSBEE: As you know, the President cut taxes for 95 percent of the workers in the stimulus. Many many billions of dollars. The President is committed to this bipartisan fiscal commission process and he’s going to seriously consider all the things that they put forward and he’s going to look at them. It doesn’t mean he’s supporting a VAT. We haven’t even contemplated a VAT.

HALPERIN: But if they recommend it, it’s not something he’d rule out?

(Refusal #6) GOOLSBEE: I’m not going to get into a hypothetical thing about it. He’s committed to a bipartisan fiscal commission.

April 21, 2010: President Obama makes it official: He is open to the imposition of a VAT on the American people. Obama’s admission came during an interview with CNBC’s John Harwood. Asked if he could see the potential for a VAT, the President said:

"I know that there's been a lot of talk around town lately about the value-added tax. That is something that has worked for some countries. It's something that would be novel for the United States. And before, you know, I start saying 'this makes sense or that makes sense,' I want to get a better picture of what our options are.”

August 29, 2011: Obama announces his intention to appoint Alan Krueger to head the Council of Economic Advisors. In a 2009 New York Times blog post, Krueger wrote:

“Why not pass a 5 percent consumption tax to take effect two years from now?”